Home News Gainful Employment Negotiators Dig Into Merits, Drawbacks of Debt-to-Earnings Rates in Day Two of Deliberations

Gainful Employment Negotiators Dig Into Merits, Drawbacks of Debt-to-Earnings Rates in Day Two of Deliberations

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Committee members working to rewrite the federal gainful employment (GE) regulations on Tuesday began to discuss the specifics of the accountability and transparency metrics used within the rule, which is intended to ensure students attending for-profit institutions and in non-degree-granting programs in any sector were well-served and could find work in their fields of study which could support the level of debt they incurred in earning their credentials.

After on the first day discussing the scope and purpose of a GE rule – whether it should apply to all institutions, to just the for-profit sector, or to non-degree-granting programs – members of the negotiated rulemaking (neg reg) committee began to deliberate on the measures used to hold institutions accountable and to ensure transparency through mandatory disclosures.

The 2014 GE regulations use a debt-to-earnings rate to determine whether a program leads to gainful employment. A program would pass if the median loan payment for its graduates does not exceed 20 percent of the higher of the award year cohort’s median or mean discretionary income, or 8 percent of the average graduate’s total income. Programs whose graduates have annual loan payments greater than 12 percent of total earnings and greater than 30 percent of discretionary earnings would fail and be at risk of losing their Title IV eligibility.

The regulations also outlined a “zone” rating, which programs would fall into if their median annual loan payments were between 20 percent and 30 percent of the average graduate’s discretionary income, or between 8 percent and 12 percent of a graduate’s total earnings. Programs that failed in any two of three consecutive years, or fell into either the “zone” for four consecutive years would become ineligible to receive federal student aid.

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